Reddy sees core sector SPV giving debt mart a leg-up

The Reserve Bank of India (RBI) governor Y V Reddy today said the special purpose vehicle (SPV) proposed for infrastructure financing has added a new dimension to the country's debt market development.

The SPV will issue debt paper with relatively longer maturity outside the central government's normal borrowing programme, Reddy said at a seminar on fixed income and derivatives market.

RBI has also set up technical groups on money market, government securities market and forex market. The reports of the groups would be placed in public domain soon.

The technical groups are working on the operational, technological and institutional aspects of RBI's withdrawal from the primary market for government securities from the start of 2006-07, as provided in the Fiscal Responsibility and Budget Management Act, 2003.

Reddy said the long-awaited Government Securities Bill is at an advanced stage of processing. The Bill seeks to repeal the Public Debt Act, which had entrusted on the RBI the responsibility of managing the government's borrowing programme.

The Twelfth Finance Commission has made certain recommendations which would mean that the state governments would approach the market instead of obtaining loans from the central government.

He said several operational and other issues will have to be addressed in the management of the borrowing programme of the state governments in future.

RBI is convening a conference of the state finance secretaries on April 8, 2005, which will be addressed by C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister and former chairman of the twelfth finance commission, to discuss these issues.